When you are financially stable, you will not only be debt-free but also find it easy to pay all your monthly expenses and still have money left over. Although the idea is simple enough, it takes deep thinking to get there.
Two things you can do to start the process of creating financial stability is to write a financial plan and increase your income.
Write Your Financial Plan
Think of a financial plan as the foundation for establishing financial stability.
Here are five essential things to include in your financial plan:
- Begin an emergency fund.
- Create a budget.
- Negotiate with your creditors to pay off your debts.
- Learn how to invest.
- Design a retirement plan.
Another thing to consider in your financial plan is insurance. While you are probably familiar with health insurance, dental insurance, homeowner’s or renter’s insurance, and car insurance because of their obvious application to your life, you may only have a vague idea about life insurance because it does not seem as urgent to buy. Still, while life insurance may not feel urgent, it’s important.
How does life insurance work? Life insurance is a contract with a life insurance company. Because you agree to pay a regular premium on your policy, the insurance company agrees to pay a specific amount of money to your beneficiaries if you die prematurely.
Life insurance works for both parties. If you die unexpectedly of illness or an accident, your family will not be in a financial crisis. Meanwhile, insurers are betting that you will live a long and healthy life and that they will make more in premiums than payouts to your family.
Increase Your Income
There are two ways to improve how much you earn:
- The more common and safer way is to get a regular job.
- The less common and riskier way is to start your own business.
While a regular job will provide you with predictable income, starting your own business can build your wealth. Although starting your own business is riskier, if you learn how to run it properly, there is no cap on your income potential.
If you like the stability of a regular paycheck, focus on finding the right employer rather than settling for any job that you can find. You are unlikely to feel motivated to increase your income if you accept a job that you dislike. To choose the right employer, make a list of your interests and aptitudes and then research companies that can offer you work that you will enjoy.
Once you get hired, strive to work your way up in the organization. This, however, isn’t simply about working as hard as possible. Instead, it’s about working smarter, too. Usually, the fastest way to provide your employer with more value is to either take advantage of their in-house career education program–or, if they don’t have one, to figure out how to go back to school to reach a higher education level.
If you are willing to take risks and like to do things your own way, then a better choice may be to start your own business. Again, make an inventory of your interests and aptitudes–and then build a business around it. For instance, if you love to write, you could start a blog, build an audience, and earn revenue through affiliate marketing.
When starting your own business, don’t do all the work yourself because there is not enough time in the day to do everything. It’s far smarter to strategically outsource tasks that other people could do better because they have specialized in a skill.
While there are many more elements to creating financial stability, starting with a financial plan and increasing your income is a good start. You can later add to this foundation by starting an investment portfolio.